Russian Ruble Hits 18-month High

The Russian ruble climbed on Thursday to its strongest level against the dollar in 18 months, as relatively high domestic interest rates attracted foreign investors to Russian assets. The dollar fell 0.8% to 56.17 in recent trade, compared with 56.62 rubles late Wednesday in New York. The recent moves comes as oil has been volatile, though the commodity has regained some ground over the past week. Because Russia is the world's second-largest oil exporter, and it depends on petroleum revenues to fund much of its federal budget, its currency tends to trade in lockstep with the price of oil, said Piotr Matys, an emerging-market currency strategist at Rabobank. "The only factor supporting the ruble right now seems to be the substantial interest rate differential between domestic rates and external rates," Matys said, adding that the currency seems overvalued. Last week, the Russian central bank cut its benchmark interest rate by a quarter of a percentage point to 9.75%. The "hawkish cut," as Matys called it, actually helped boost the currency because it signaled that the central bank intends to lower interest rates more slowly in 2017. In 2016, the central bank cut rates in half-a-percentage point increments. Oil prices edged lower on Thursday, with Brent crude oil, the international benchmark, off 0.3% at $52.40 in recent trade, though it remained up 3% on the week. Russian President Vladimir Putin delivered public remarks at the International Arctic Forum on Thursday, but Matys said his comments had little impact on the currency.